Stocks close lower amid falling oil prices

April 13, 2011

Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall in this July 16, 2010, file photo. Commodities fell sharply on April 12, 2011, and headed for the steepest daily fall in a month after another bearish oil report from Goldman Sachs triggered a second day of widespread selling,

"We continue to believe that—even with the loss of Libyan production—the oil market has adequate inventory and OPEC spare production capacity to avoid the degree of physical tightness experienced in 2008 well into next year," Goldman said in a note to clients.

Goldman's decision to also book profits on metals, including gold, silver, copper and platinum, sent prices of these commodities falling as well. Gold closed nearly 1 percent lower at $1,452.90 an ounce. The dollar, meanwhile, continued to slump against a basket of currencies.

"I think we’re peaking out on commodity prices," says Jim Paulsen, chief investment strategist at Wells Capital Management, who said tightening policies in emerging markets like China are succeeding in slowing growth. "You’ll see U.S. and global growth slow a bit, which takes the upward trend out of commodities markets."

Among other techs, Nokiaslumped after Morgan Stanley downgraded to "underweight" from "equal-weight." Alcatel-Lucent rose, but Ericssonslipped even after Morgan Stanley upgraded the firms to "overweight" from "equal-weight" and "equal-weight" from "underweight," respectively.

Meanwhile, Apple rose after Jefferies said the iPod maker might be launching a new video-focused cloud-based service. The firm also reiterated their "buy" rating on the stock. According to rumors, the new iTV-like device could rival firms such as Netflix. Apple shares have been on a decline since April 6.

And Level3 Communications fell a day after news the communication firm planned to buy Global Crossingfor $23.04 a share in a tax-free, stock-for-stock sale. UBS upgraded Level3 on the news to "neutral" from "sell."

Volume on the consolidated tape of the New York Stock Exchange was 4.2 billion shares, while about 950 million shares changed hands on the NYSE floor.

Treasury prices held gainsafter the government auctioned $32 billion of 3-year notes, which had a high yield of 1.280 percent and bid-to-cover of 3.25.

In economic news, the government reported import prices rose in March, and the trade deficit fell. Import prices rose 2.7 percent in March from a 1.4 percent gain in February thanks to higher oil and food prices, the Labor Department said Tuesday.

But Paulsen at Wells Capital Management points out that the trade deficit lags changes in currencies by 18-to-36 months, and that the current deficit reflects a period (summer 2008 to March 2009) when the dollar was strong.

"It takes awhile to change the direction of the trade boat," Paulsen said.

With the dollar weaker now for nearly two years, Paulsen expects the trade deficit will begin to fall significantly, which should give a boost to gross domestic product this quarter or next.

"I can see where we go from '1-something' in the first quarter to '5-something' in the third," Paulsen said, referring to GDP. "I do think that’s what this sets up."

And the U.S. reported a monthly budget deficit of $188 billion in March as the government spent more than twice what it took in the last month, according to the Treasury Department. The figure was just shy of the $189 billion forecast of economists polled by Reuters.